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Quiz Clothing In Administration Rumours

in A guide for redundant employees in administration or insolvency situations News Retail What is a CVA (Company Voluntary Arrangement)?

Update 20th FebruaryIt has been confirmed that Quiz has gone into administraton with the loss of approximately 200 jobs.  23 stores will close.Sky News has reported that Quiz, which is chaired by the former JD Sports chief Peter Cowgill, is lining up Teneo as administrator in a move expected to take place before the end of next week. According to reports, Quiz is purportedly looking to close up to one-third of its stores in order to stabilise its struggling business and reduce costs.The fast fashion chain, which now employs about 1,500 could lose hundreds of jobs as a result of the move, which was lead by the founding Ramzan family.Quiz has hired restructuring specialists at Teneo to investigate its possibilities. Quiz is scheduled to delist from the London Stock Exchange's AIM market and return to private ownership after a shareholder vote earlier this month.Possible actions to help with the closures include a company voluntary arrangement (CVA) or pre-pack administration.A person familiar with the matter told the Telegraph who originally broke the story that "nothing is being ruled out," and that a decision is anticipated in the upcoming weeks.Since taking over as CEO in March 2023, Sheraz has reportedly concentrated on reducing expenses by selling off the chain's underperforming locations.With only £2.3 million in liquidity, including £400,000 in cash reserves and £1.9 million in undrawn banking facilities, Quiz disclosed in the lead-up to Christmas that it was on the verge of going bankrupt.Sheraz's father, Tarak, who started Quiz in 1993 with just one store in Glasgow, gave the business an emergency loan of £1 million last summer. Quiz is now frantically looking for additional finance, probably on harsher conditions, as HSBC is apparently unwilling to continue backing the company.In contrast to its £2.3 million profit the year before, Quiz reported losses of almost £7 million last year. The job of leading the retailer through its turnaround has been placed on chair Peter Cowgill, a former manager of JD Sports.In the upcoming weeks, a formal announcement on the company's future is expected.With Poundland and now Quiz are we going to see a string of retail failures?  At least a CVA gives the company a good chance of continuing to trade

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Quiz Clothing In Administration Rumours

Poundland in CVA rumours

in A guide for redundant employees in administration or insolvency situations News Retail What is a CVA (Company Voluntary Arrangement)?

Sky News has reported that Polish-based Pepco Group, which has controlled Poundland since 2016, has recruited AlixPartners, the retail experts, to handle a sales dip that has prompted worries about company's future.  The company operates over 850 sites and employs 18,000 staffLike for like sales were down 7.3% over the crucial Christmas period.AlixPartners is understood to have been formally engaged last week, with options including a company voluntary arrangement (CVA) or restructuring plan said to have been discussed by a range of advisers on a highly preliminary basis.In its trading statement, Pepco said that Poundland had suffered "a more difficult sales environment and consumer backdrop in the UK, alongside margin pressure and an increasingly higher operating cost environment"."We expect that the toughest comparative quarter for Poundland is now behind us - the same quarter last year represented a period prior to the changes made within our clothing and GM [general merchandise] ranges - and therefore, we expect the negative sales performance for Poundland to moderate as we move through the year."​The company is said to be looking at multiple ways to improve its cash position by selling more goods over £1 to expand its range of products.The mere fact that it has been leaked that a company voluntary arrangement (CVA) has been discussed is pertinent.  The reason is because talk of a CVA can be a very useful tool to put pressure on landlords to consider rent reductions.  Under a CVA the retailer can exit leases, at no cost, leaving landlords out of pocket.  To understand a bit more about this please read our CVA and retailers article.Of course it is also likely that the company will come under extra pressure from the increases in minimum wage, NI increases and the loss of 75% business rates relief.Since the cost of living crisis there has been strong competition from other discounters like B&M and Poundstretcher.  Poundstretcher themselves used a CVA to reduce costs. They exited in 2022 paying just 12p in the £1 to its unsecured creditorsIf such a big retailer were to fail this would send shockwaves through the sector and would be a political headache for the Labour Government.​​

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Poundland in CVA rumours

Restructuring Advisors Expect Challenges To Continue for Charities in 2025

in Charities News

The number of charities facing financial difficulty is expected to rise this year due to an unprecedented demand for support against a backdrop of increasing costs and reducing income.That is the view of a North East restructuring expert, Chris Ferguson, who is Director of Recovery & Insolvency at RMT Accountants & Business Advisors based in Gosforth, Newcastle.The charity sector continued to see high levels of distress in 2024 with the recent insolvency of counselling charity, Relate, being the latest high profile casualty within the not for profit and community services sector. The Chancellor’s Autumn Budget in October 2024 set out measures to help charities in the wake of the ongoing challenges facing the sector, but the rise of the national living wage and employer national insurance contributions (NICs), effective from April 2025, will place further burden on the finances of charitable organisations that are already struggling to cope.Charity revenues are particularly susceptible to turbulent economic conditions.  In addition to impending cost increases, the cost-of-living crisis continues to impact the disposable incomes of prospective donors, with increasing food and energy prices and the withdrawal of the winter fuel allowance likely to impact donations, placing further pressure on charity resources.  Trustees are therefore being warned that the rise of charities in financial difficulty is likely to continue in 2025.Findings from research undertaken by the Charities Aid Foundation (CAF) in 2024 showed that many charities are at maximum capacity and many more are being forced to make difficult decisions on who they can help.  But, despite the overwhelming requests for support, one in eight charities are faced with having to make redundancies or reduce staff numbers.  Half of charities reported that the cost-of-living crisis had negatively impacted staff and volunteer morale (52%) and many were struggling to recruit or retain suitably qualified candidates or volunteers (51%).And CAF research shows that many charity leaders stated that they spend most of their time firefighting, with a third stated they feel the sector is ‘unhealthy’. Chris Ferguson warns that Trustees need to urgently focus their attention on maintaining accurate financial information and emphasises the importance of Trustees continuously monitoring their financial position. He says “Trustees must focus on monitoring and forecasting their income and expenditure for the year ahead, particularly given the significant wage and NIC cost increase they will face later this year following the announcements in the Autumn Budget.  All Trustees have an obligation to ensure they have full visibility over their charity’s operation, ensuring that resources are managed responsibly and they are acting with reasonable care and skill when undertaking their role”. Trustees must not lose sight of the importance of recognising these responsibilities, particularly where charities find themselves in financial difficulty.  “Trustees are often volunteers giving up their own time to support their local communities.  However, many do not fully appreciate that they can become personally liable for charity losses if they have not complied with their basic duties as a Trustee. This is clearly a risk many Trustees do not envisage when they agree to take on a voluntary role.” Ferguson warns. Trustees are advised that some of the key warning signs of distress may include:-Minimal levels of unrestricted funds Declining income levels from donations or grants Reducing profitability, or the charity is running at a deficit Arrears with landlords and suppliers Discovery of financial irregularities Where Trustees believe that a charity is in financial difficulty, they should seek immediate professional advice.  “We have supported a number of charities with financial issues over the past 12 months.  Seeking support as early as possible means that Trustees are complying with their own statutory duties as representatives of charities.  Initial advice is often free, so there is no cost for seeking independent professional advice as early as possible”. Trustees that require a free initial discussion can contact Chris Ferguson on 0191 256 9500 or by email at chris.ferguson@r-m-t.co.uk or Chris Wray on 0191 256 9500 or by email at chris.wray@r-m-t.co.uk.

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Restructuring Advisors Expect Challenges To Continue for Charities in 2025

UK SME companies run by women are less likely to go bust than companies run by men.

in Directors Duties in Insolvency and their Implications News

UK SME companies run by women are less likely to go insolvent than companies run by men.KSA Group Limited, insolvency practitioners who run the website www.companyrescue.co.uk has researched the UK SME market of over 4m businesses in an attempt to see if there was a gender bias on the board of companies that become insolvent.The study was designed to investigate if the insolvency rate was higher for male or female-run companies.  In this follow up to its 2018 Study of its kind in the UK, companies were investigated to determine the gender of the board of companies that had either gone into administration or liquidation over the last twelve months, to see if there was any correlation between gender and the general financial health of a business.Key findingsInsolvency rate is 71% higher in male run companies 9 times as many companies are run by men than women There is a small difference in the industry sectors of companies run by men or run by women. Construction businesses more likely to be male run and education business more likely to be run by women.It was found that the insolvency rate of male-dominated businesses was 0.7% and those in female-dominated businesses was 0.41%.  So, the insolvency rate is 71% higher in male-run businesses.What conclusions can we draw from these findings? KSA Group said; “It is apparent that the insolvency rate is higher in male run businesses, but this may be due to a number of factors that have nothing to do with whether men are inherently worse at running businesses than women.  It may well be that the businesses that tend to be more likely to become insolvent due to the nature of the industry or recent economic events are coincidently run by men.” However, he went on to add that "This is now the third study that we have carried out since 2018 and the results are very similar.  In 2018 the types of businesses run by women were different to the ones in 2024. In 2018 property businesses made up a higher proportion of women run businesses that went into insolvency whereas in 2024 it was Retail and Education.  This might suggest that the business sector is not that relevant and so pointing to a higher financial competency, or less risk taking, by women directors. Women in the Insolvency Profession On average, 15% of Licensed Insolvency Practitioners (IPs) are women which does mirror the number of women run businesses.  One outlier firm is ​Alvarez and Marsal Europe LLP with 27% of their IPs being women.  ​See the pie charts below which have categorised businesses into the established Standard Industry Classification. 

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UK SME companies run by women are less likely to go bust than companies run by men.

Administration for Torquay United

in News

Devon based, Torquay United, of the National League South, have formally gone into administration. This comes following the deadline which passed on Thursday for any potential bidders to bring some saviour capital. Clarke Osborne, owner, announced his intention to appoint administrators for the club in February, two months later and the intention was made a reality. In March the Gulls faced a 10 point deduction so there will be no further sanction. This paves a more positive outlook despite the situation, particularly as administrators are said to be in talks with interested parties already. Begbies Traynor', Scott Kippax, Neil Vinnicombe and Simon Haskew, will be handling the administration process. In the meantime, the club will be run by directors, George Edwards and Mel Hayman, on a voluntary basis. As for any creditors, the club secretary is contactable directly. "A further announcement is anticipated within the next two weeks when the administrators hope to confirm that the club's future has been secured." Will it be the final whistle? Devon Live shares more and Torquay United answer FAQs for fans, on their website.

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Administration for Torquay United
dot dot loans logo

Dot Dot Loans Goes Into Administration

in A guide for redundant employees in administration or insolvency situations Finance and Funding News What Does Going Into Administration Mean?

Dot Dot Loans owner the Morses Club and Shelby Finance has gone into administration with the loss of 101 jobs. 272 staff remain across the two firms whilst the administrators look for a rescue or sale.Ed Boyle and Rob Spence from Interpath Advisory have been appointed as joint administrators.The companies have been under financial stress since the Morses Club is now facing lots of customer redress claims for offering them unaffordable loans.In May 2023, the Morses Club entered into a Scheme of Arrangement which is a system of restructuring used for complex financial companies and trusts and is administered by lawyers.The administrators said; “However, despite management’s best efforts, Morses Club has been unable to complete the refinancing of its existing debt facilities and therefore, the directors took the decision to appoint administrators to the businesses.As a result of the insolvency of Morses Club, the scheme automatically terminates early – further information regarding the impact on customers who submitted a claim in the scheme is available on its website”Shortly prior to the appointment of the joint administrators, all new lending ceased, but the companies continue to collect outstanding loans from customers.Administrators said it was "important that customers continue to make payments on outstanding loans as they fall due, as not doing so is likely to impact their credit rating/profile and their ability to borrow".The joint administrators will be working with the employees affected by redundancy over the coming days to provide them with support.

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Dot Dot Loans Goes Into Administration

Wilko collapses into Administration

in A guide for redundant employees in administration or insolvency situations News Retail What Does Going Into Administration Mean?

29 September 2023Sky News share today that after seeing some proposals from PwC, it is likely that unsecured creditors will receive between 4p and 8p in the pound, from the collapse of Wilko.According to the proposals, The Pension Protection Fund (£20m owed as a secured creditor), along with Barclays (£2.4m owed) and Hilco UK (£39.9m owed) are expected to be paid in full. The PPF is also owed monies as a unsecured creditor,13th September 2023The Range has purchased Wilko's brand and online assets for a total of £5m it is understood. An announcement is expected by the administrators later.  The Range was under pressure to buy the assets as it faced increased competition from online marketplace OnBuy.12th September 2023The owner of Poundland has agreed to take on the leases of dozens of Wilko shops.Pepco Group, which owns Poundland in the UK, is expected to convert up to 71 Wilko stores to the Poundland brand.11th September 2023Today we here the news that the rescue deal on the cards with HMV owner, Doug Putman, has collapsed. It is expected that now administrators of PwC will strike deals with The Range and Poundland's owner.The Range is likely to purchase Wilko's brand and online assets, whereas Poundland are in talks to buy 100 stores.5th September 2023B&M has bought 51 Wilko shops (locations not disclosed) for £13 million after the discount retailer collapsed into administration.The shops are set to be rebranded as B&M.  The retailer did not acquire Wilko’s brand name or any of its intellectual property. It said it would provide an update on the timing of the new B&M openings in November.Despite this arrangement with B&M, a further 1,332 jobs have been lost. Across 52 Wilko stores, 1,016 redundancies will take place, alongside a loss of 299 roles at two of its distribution centres and 17 at its digital operations department.Conversations with administrators continue.Sky News report more.31st August 2023The latest update to be heard on the situation with Wilko is that OnBuy, the online marketplace, has made a last minute rescue bid for the brand. As reported in the Retail Gazette, it is thought that OnBuy only want to continue trading through Wilko.com.Just earlier on today, it was revealed that a proposed £90m deal from private equity firm, M2 Capital, claiming to retain all employees' roles for two years, whilst it saved Wilko from collapse, had fallen through. The bidder was unable to file the relevant paperwork in time which meant the inability to provide proof of funding.Following this, redundancies will shortly commence, with:269 employees at the retailer's support centre (Worksop) to be made redundant from close of play 4th September 14 employees at Kin Limited to be made redundant from close of play 4th September - this is a subsidiary of Wilko For the two distribution stores in Worksop and Newport, redundancies expected to be announced from next weekJoint administrator Jane Steer said: “It’s with great sadness that we announce these redundancies. We’re incredibly grateful to these team members for the support and dedication they’ve shown to the company, particularly over the last few very difficult weeks. We will continue to do all that we can to support staff through this period of difficult upheaval, and to maximise their opportunities for a rapid return to work. Our priority is to ensure that all team members affected by redundancy are assisted in processing their claims with immediate effect. We will be circulating correspondence to all staff as soon as possible which will outline the support available to complete redundancy payment forms. Advice and assistance will also be available from Job Centre Plus and other agencies.''With this in mind, talks are underway still with HMV owner, Doug Putman and PwC.28th August 2023The latest on Wilko x Administration threat is that Doug Poutman, HMV owner, is in discussion with PwC about offering a finance offer for hundreds of Wilko stores. He seeks a £50m backing to do so. If this falls unsuccessful, a deal with Poundland is likely to go ahead.24th August 2023We hear an update today from the administrators of Wilko. They share that jobs are set to go and stores will close as no buyer has been found for the business as a whole. This being said, some parts of the group could be bought.In a statement, PwC said: "While discussions continue with those interested in buying parts of the business, it's clear that the nature of this interest is not focused on the whole group. Sadly, it is therefore likely that there will be redundancies and store closures in the future and it has today been necessary to update employee representatives.''23rd August 2023Rumours share that Poundland owner,  Pepco Group is in talks with PwC to acquire around 100 Wilko stores. Alongside this, B&M European Value Retail are supposedly negotiating over 40-50 stores. There are then various other value retailers, like TOFS, of whom have lodged offers to acquire smaller parts of Wilko's 400 store strong chain.A more official announcement is expected tomorrow on at least some of the sale agreements.Even with such agreements, there still remains risk of some site closures and job losses.Let's see what is to come...18th August 2023The deadline for interested parties to put forward a rescue deal for Wilko has passed. Administrators weigh up rescue bids. In the meantime,  a secondary sale begins, with discounts on hundreds of products in store.It has been heard that B&M, Poundland, The Range and Home Bargains - all competitors of the homeware retailer, have had interest to submit an offer.Whilst PwC are working on this case, no redundancies have been made. Only time will continue to tell the chains future.14th August 2023Companies vying to buy Wilko have been given until Wednesday 16th August to make an offer for the homewares chain which fell into administration last week.10th August 2023High Street home wear retail chain, Wilko, has collapsed into administration appointing PricewaterhouseCoopers (PwC) as administrators. This leaves 12,000 jobs at risk, as well as the future of many of its 400 stores.With the appointment of PwC, it triggers administrators to run a further administration sale, to see if there are any last minute rescue offers. However, should this not be successful, the 93-year-old chain will close and have its assets sold - making Wilko the biggest casualty of the High Street this year.  If you are an employee, worried about what this means for you, read our guide.Further updates to follow.9th August 2023Wilko has suspended all home deliveries, suggesting a fall into administration is inevitable. Talks with buyers have been underway, but it is thought nothing much will come from them, with the latest updates.8th August 2023 The owner of the Laura Ashley brand, Gordon Brothers, is in talks about a potential rescue deal for Wilko. Insiders say the offer may involve Gordon Brothers providing funding to the retailer to implement a restructuring which would involve a key amount of stores closing and jobs lost.PricewaterhouseCoopers (PwC), which is advising Wilkos', is understood to be seeking binding offers within days, with the company close to running out of cash. Should PwC be appointed as administrator, a further sale process will proceed before embarking on a liquidation of the retailers assets, if no rescue deal comes through.3rd August 2023News today is that Wilko is teetering on the brink of administration, with 12,000 jobs at risk.Despite offers from potential buyers, the needed liquidity to cover the cash pressures being faced, has not been met.Mark Jackson, CEO of Wilko announced the decision to file a notice of intention to appoint administrators. In the meantime, discussions will continue with interested parties in the hope of a late-coming rescue. Watch this space!  A notice of intent gives the company 10 days for a rescue deal to be agreed.  If nothing is forthcoming then it is likely that the company will go into formal administration with the loss of thousands of jobs.27th July 2023It has been reported that Hilco have put in another £5m into Wilko to help with the current cash flow problems.19th June 2023It has reported in the news that landlords of Wilko face the chance of no rental payments for at least the next three years, as a CVA is likely to launch in the next month. The restructuring arrangement looks to cut rents at 240 of its 400 stores, with no stores facing closure.One source close to the process told The Times, that the retailer will soon run out of funds and could collapse into administration if a CVA is not agreed.12th June 2023Wilko has brought in CBRE property advisors to open negotiations with landlords on rent reductions.According to the latest news, Wilko is exploring a Company Voluntary Arrangement, in order to renegotiate rents and potentially close some stores, as part of its cost-cutting plans.PwC advisors are said to have been approached, to look into the various restructuring options possible.Chief executive Mark Jackson remarked: “We’re in the early stages of the turnaround and, as is usual, the directors continue to explore all options for Wilko’s long-term future.”16th February 2023Wilko has announced plans to cut more than 400 jobs, including assistant store managers, retail supervisors, head office managers and call centre workers, in the troubled retailer’s latest effort to control costs.4th January 2023It has been reported that Hilco, the retail turnaround fund, has lent £40m to Wilko to secure its long term future.Wilko has said that it has received a £30m emergency loan to see it through the Christmas trading period. It has already sold its distribution centre for £48m and leased it back. Hopefully this will be enough.In a statement Jerome Saint-Marc, Wilko CEO comments:“Our relationship with our lending partners is solid. The recent sale and leaseback of our distribution centre to DHL earlier this week unlocked £48m which has enabled us to repay our revolving credit facility in full. We’re taking this opportunity, now that the deal is done, to review how we manage our ongoing financing to best trade through the current retail environment while continuing to invest in our future.”Suppliers to Wilko have had their credit insurance withdrawn according to reports. If true, this is a big blow as that now means that suppliers will be reluctant to grant Wilko any credit, so putting serious strain on the retailers finances.Both Retail Week and Retail Gazette have reported that the restructuring advisors Teneo have been instructed by Wilko, the homewares store, to look at how it can turnaround its fortunes. Last month it announced that it was extending its payment terms to 60 days and that anyone due to be paid in September would be paid in November.These are indications that the company is struggling. So what options does the chain have? It has already closed down 15 stores but if it needs to close down many more, that might be subject to long leases, then a company voluntary arrangement is a good way to do this. High rents may not be the issue here but increased competition and a drop in trade as the cost of living crisis bites.

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Wilko collapses into Administration
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26 councils are at risk of effective bankruptcy according to recent research

in News

The Special Interest Group of Municipal Authorities (Sigoma) represents 47 urban authorities in the northern, midland and south-coast regions of England. The government group carried out a survey and found the below:5 councils are in the process of deciding if a section 114 notice should be issued (a warning sign of insolvency!) 9 councils said they may have to declare bankruptcy next year 12 councils considered declaring bankruptcy next yearThis would follow some similar collapses in recent years. Slough revealed a ''catastrophic'' £100m black hole in its budget in 2021, whilst in November 2022, Croydon annouced its third bankruptcy in two years. A disastrous property investment binge by Woking's council came to light recently too.The threat of this number growing has been driven by the dwindling of cash reserves usually held over to plug gaps in budgets. Ultimately, authorities have 'nothing left'. According to councils, the most common cause of these pressures was due to an increase in demand for children’s social care services.Chairman of Sigoma, Sir Stephen Houghton, and leader of Barnsley Council, said: “The government needs to recognise the significant inflationary pressures that local authorities have had to deal with in the last 12 months. At the same time as inflationary pressure, councils are facing increasing demand for services, particularly in the care sector. Pay increases are putting substantial pressure on budgets, and so the government must ensure that local authorities have the additional funding they need to fully fund these pay increases or risk impacting future service delivery. The funding system is completely broken. Councils have worked miracles for the past 13 years, but there is nothing left.”Worried Directors GuideLIQUIDATION GUIDECVA Guide

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26 councils are at risk of effective bankruptcy according to recent research

Breathe, the EV company backed by the Mayor collapses into adminstration

in News

Electric Vehicle Company, Breathe, which provides EV's including Teslas to private-hire drivers, has collapsed into administration. This could greatly impact on London taxpayers, with millions of pounds of losses to be faced.Sadiq Khan, the founder of The Mayor's Energy Efficiency Fund (MEEF), had injected £3.2m into the company in March 2022 - just 15 months prior to administrators from Begbies Traynor being appointed. The MEEF was set up to provide debt and equity to small business owners, and is managed by Amber Fund Management.As of yet, the reason for the collapse is not clear. The appointed administrators are working closely with all parties involved to complete a sale of the business and if needed, realise assets to enable any debts to be repaid.Breathe operates with a subscription service, whereby customers can take full ownership of their car at the end of the subscription period. Other disciplines are involved too, with financial products being offered including insurance.Sky News provide more information.

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Breathe, the EV company backed by the Mayor collapses into adminstration

Administration for major UK wedding dress retailer, David’s Bridal

in A guide for redundant employees in administration or insolvency situations News Retail What Does Going Into Administration Mean?

Just hours after its US owner filed for bankruptcy and David's Bridal UK has filed an intention to go into administration. Andy Pear and Milan Vuceljic of Moorfields Advisory have been put on standby to be  appointed as the administrators working on the case.Across the UK, David's Bridal has 100 employees across its four stores in Watford, London, Brimingham and Glasgow.The retailer, founded in America in 1950, has operated in the UK since 2013, specialising in wedding and occasion dresses and accessories - a name known for many to-be-brides!In a statement, David’s Bridal said: “David’s Bridal stores remain open, and the company intends to continue operating in the ordinary course, including by fulfilling all customer orders without disruption or delay.'' It said it “intends to continue exploring a sale of all or some of its assets”.This is not the first time the retailer has faced difficulty. In 2018 it had filed for bankruptcy. According to CEO of the American parent company, meaningful strides had been taken in recent years to meet customers needs and transform accordingly.“Our business continues to be challenged by the post-Covid environment and uncertain economic conditions, leading us to take this step to identify a buyer who can continue to operate our business going forward. We are determined to stay focused on our future, because we believe we have an important role in ensuring that every bride, no matter her budget, can have her perfect dress.”When analysing the recent history of the UK counterpart, it had warned of a “material uncertainty” about its ability to continue in its 2021 accounts, which were signed off by the board last December. This was because the US parent company had done a deal in November 2022 to create additional liquidity that was dependent on “continuing compliance” with the loan terms.The UK business’s most recent published accounts, for 2021, showed a £170,000 loss on revenues of £4.3m. It last recorded an annual profit in 2018.

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Administration for major UK wedding dress retailer, David’s Bridal

More than 100 building firms predicted to go bust each week in 2023, according to new research

in Construction News

New research from Red Flag Alert suggests that the construction sector is going to face some trouble this year, with financial experts predicting more than 100 building firms to go bust every week.This is no shock, with construction having faced difficulty before, and as The Insolvency Service reported before Christmas, businesses within the construction sector are going bust at the fastest rate in a decade.According to Red Flag Alert’s research, there is around £300m in bad debt within the UK construction industry, as we enter 2023. This could rise to £1bn by the start of 2024. Ultimately, firms who usually keep their heads above water though the current recession, are being dragged under by the bad debt of those whom fail.Why are there so many unpaid bills? Well, with much pressure from staff and supply chain issues for the sector, what do you expect? Mixed with Covid and all the implications left, along with inflation and rising interest rates. Things do not look good.Chief Economist of Red Flag Alert, Dr Nicola Headlam remarked:‘’ This is not good news for the industry and UK as a whole. This will lead to a much smaller pool of construction companies available for contracts and for suppliers to do business with. The post-recession economic bounce back will be hampered by a lack of building companies available for projects in the next growth stage, and a supply chain that will be unable to respond to growth signals This will choke off growth in the next economic cycle.”Its looking to be a pretty perfect storm for insolvencies this year in the construction industry. And what a time! With this recession, we need construction to lead the way forward, particularly with the housing crisis we are in. Will the construction industry continue to decline or is there at least some hope for a healthier future?If you are a worried director of a construction firm or a business related, do get in touch. Let our expert advisors talk through and consider the best way forward.

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More than 100 building firms predicted to go bust each week in 2023, according to new research

Construction Sector Insolvencies Hit A Record High

in Construction News

According to the latest data from the Insolvency Service, businesses within the construction sector are going bust at the fastest rate in a decade. As a result, the number of company insolvencies overall is being driven to a 13-year high.Data found that for the first half of the year there were 10,717 company insolvencies – of which the construction sector accounted for a fifth (2,094 insolvencies). When analysed more closely, in just the first quarter the construction sector reached 1,048 insolvencies. This marks the highest level since the same quarter of 2012. For the second quarter, numbers reached its highest since Q3 of 2009.Construction firms, which make up 7% of the UK economy, are being hit by rising material costs, staff shortages and falling consumer demand – leaving no other option than seriously squeezed margins.When you take into consideration that for each building project, the materials account for around a quarter of the total cost, it is no wonder there are struggles. The price of core materials such as timber and steel have risen around 17%-18% each. Smaller, local builders struggle most with vulnerability since they cannot benefit from economies of scale.Passing costs onto customers in response is proving difficult with clients rather just pulling out of the project and fewer new ones being requested.The construction industry has faced trouble for some time now, as reflected in data overtime – will the tables turn or is this the way forward for the sector?

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Construction Sector Insolvencies Hit A Record High